If you have one or more traditional IRAs and are age 73 or older, you’re probably familiar with three of the most dreaded letters in the tax world: RMD, short for required minimum distribution. Starting the year you turn 73, the IRS requires you to withdraw a certain amount from your traditional IRAs annually. This amount is based on your age and increases as you get older. RMDs are taxable income, which is precisely why many retirees dread them. But if you’re charitably inclined, there’s a powerful way to meet your RMD requirement without increasing your taxable income: the qualified charitable distribution, or QCD. These transfers, known as qualified charitable distributions (QCDs), have become even more powerful under the new One Big Beautiful Bill Act (OBBBA)—and could be one of the most effective ways to give.
How QCDs Work
With a QCD, you direct money from your IRA straight to a qualified charity. That amount counts toward your RMD for the year—but it doesn’t count as taxable income to you. Even better, you can use a QCD whether or not you itemize deductions, so you can still benefit from charitable giving on your tax return.
The money never touches your hands, and the transfer is wholly excluded from your taxable income. While this means you cannot claim the gift as an itemized deduction, you don’t need to—because avoiding taxation is the best. It’s far better than a 100 percent deduction.
A QCD can help you
- satisfy all or part of your RMD for the year;
- support the charities you care about;
- avoid reporting the RMD as taxable income; and
- reduce the risk of being pushed into a higher tax bracket.
While RMDs don’t start until age 73, you can make QCDs when you turn 70 1/2.
Tax-Saving Advantages
QCDs provide you with many distinct benefits, including the five below:
- Lower taxable income. Unlike regular IRA withdrawals, QCDs do not increase your adjusted gross income (AGI) or modified AGI (MAGI). This helps you stay out of higher tax brackets and avoid triggering phaseouts of other deductions and credits.
- Avoid new OBBBA restrictions. Starting in 2026, the OBBBA reduces itemized charitable deductions by floors and limits tied to income levels. QCDs are exempt from these rules.
- Meet required minimum distributions (RMDs). If you are age 73 or older, QCDs can count toward your annual RMD, allowing you to satisfy the requirement without adding taxable income.
- Preserve other tax breaks. By keeping AGI and MAGI lower, QCDs can help you avoid Medicare premium surcharges, the 3.8 percent net investment income tax, and the loss of valuable deductions such as those for state and local taxes.
- Estate planning benefits. QCDs reduce the size of your taxable estate, potentially lowering future estate tax exposure.
The annual QCD limit is generous: up to $108,000 per person per year. For married couples filing jointly, each spouse can make a QCD of up to $108,000 from their own IRA, for a combined total of $216,000 for 2025.
The qualified charitable distribution must go to a Section 501(c)(3) charity—such as a church, school, or other non-profit organization. You cannot make QCDs to donor-advised funds or private foundations.
Your best choice is to have your IRA trustee transfer the QCD directly from your IRA to the charity. Also, make sure you get a written acknowledgment from the charity for your records.
Make the qualified charitable distribution first if you plan to take multiple withdrawals from your IRA during the year. The IRS treats your first withdrawal as your RMD, so taking the QCD first ensures it counts toward your RMD.
And most important, don’t forget to let your tax preparer (us) know you made a QCD. We need to report it correctly on your tax return.
Takeaway
If you are charitably inclined and have reached age 70 1/2, QCDs may be your path to give generously and cut your tax bill. The OBBBA makes them even more attractive in 2025 and beyond.
If you want to discuss QCDs, contact us today!
(Updated Dec 20, 2025)